Nagarjuna Fertilisers and Chemicals Ltd (NFCL) on Friday announced an investment of Rs 4,500 crore to set up a new urea plant in Andhra Pradesh with a capacity of 1.3 million tonnes per annum.
This is the first major investment after the government announced last month the new urea investment policy , which seeks to raise country's urea production by 8-9 million tonnes entailing an investment of about Rs 35,000 crore.
"NFCL has started project work on its third plant at Kakinada in Andhra Pradesh. This new facility will enhance to overall urea production of NFCL by 1.3 million tones per annum taking the total production capability to 2.9 million tonnes per annum," the company said in a statement.
Hyderabad-based firm has awarded early work order to Technimont of Italy, it added.
"Cost of expansion is about Rs 4,500 crore, which will be financed through an appropriate mix of debt and equity. The brownfield expansion is an addition to NFCL's existing capacity of about 1.6 million tonnes per annum," it said.
NFCL said key project approvals like environmental clearance, water allocation, contracts for natural gas are complete and it expects to be the first in the country to complete its brownfield expansion and start production.
The company's expansion plan will be aided by an expected increase in the supply of natural gas, which is the main feedstock in producing urea.
The company said that it is ideally placed to utilise gas when there is an increased production from new fields in the KG basin.
"There is a new LNG terminal proposed at Kakinada Port and NFCL would be able to utilise the LNG through this terminal. Since NFCL is located at the pit head, it would have distinct advantages in terms of availability of gas as well as economy in transport cost," it said.
State-run gas utility GAIL India is building a floating LNG terminal off the Kakinada coast by next year. That apart, Reliance Industries Ltd's (RIL) east-West gas pipeline, that transports natural gas from its KG-D6 fields, originates at Gadimoga in Kakinada.
India, which consumes about 30 million tonnes of the key nitrogenous fertiliser annually, imports about 8 million tonnes every year.
Under the new urea investment policy, the government will give 12-20 per cent post-tax return on fresh capital infused by manufacturers for setting up of new plants as well as for expansion and revamp of the existing ones.
To ensure this return, the government would cover the entire cost of the natural gas, which is the main feedstock of urea and accounts 80 per cent of the cost.